Ruth v. Cox

• Decision Date: 09 September 1930
• Parties: RUTH v. COX ET AL. [a1]
• Court: Oregon Supreme Court

291 P. 371

134 Or. 200

RUTH v. COX ET AL. ^[a1]

Supreme Court of Oregon

September 9, 1930

Department 2.

Appeal from Circuit Court, Clatsop County; H. K. Zimmerman, Judge.

Creditor's suit by Anna Ruth against Edward Cox, John Larsson, and others, with a cross-bill by defendant last named. From a portion of the decree, the last-named defendant appeals.

Proper decree stated.

This is a creditor's suit, heard in the circuit court of Clatsop county on September 22, 1928.

The plaintiff alleges, in substance, that prior to the date mentioned she brought an action at law against defendant Edward Cox in the circuit court of Clatsop county, and, on November 5, 1927, obtained judgment against him in the sum of $2,500, together with costs and disbursements, which judgment was entered of record in the judgment lien docket of that court. On February 17, 1928, at the instance of the plaintiff in that action, a writ of execution was issued by the clerk of the court, directed to the sheriff of Clatsop county commanding him to satisfy the judgment, with interest, out of the personal property of the judgment debtor, and, if sufficient personal property could not be found, then, out of the real property belonging to him on the day when the judgment was docketed in the county or at any time thereafter. No property, personal or real, was found in Clatsop county out of which the judgment might be satisfied either wholly or in part, and, on May 29, 1928, the execution was returned unsatisfied. By her complaint, in which there is embodied much matter not pertinent to the issue here presented, the plaintiff seeks the cancellation of certain deeds to real property, and certain mortgages upon real and personal property made and executed by defendant Edward Cox prior to the bringing of plaintiff's action at law against him in 1927, upon the ground that such deeds were executed and delivered for the purpose of defrauding his creditors, and that such mortgages were given with the intent to conceal his property and prevent his creditors from levying upon the same.

Defendants Edward Cox and Mary E. Cox made no appearance by answer or otherwise.

Defendant John Larsson, to whom the mortgages were given, answering plaintiff's allegations of fraud, denied the same, and filed a cross-bill wherein he sought the foreclosure of the real estate mortgages and the chattel mortgage for $2,058 which covered a herd of 40 head of dairy cattle.

The trial court found that the real estate mortgages executed by Cox to Larsson were regular and based upon a valuable consideration, but held that the chattel mortgage for $2,058.00, although made, executed and delivered for a valuable consideration, had been rendered invalid by an oral agreement between the parties thereto whereby Cox had contracted with Larsson to keep the original dairy herd good by replacing every cow that for any reason should become unsuitable for dairy purposes with a cow that was fit for such purpose. In short, this chattel mortgage was held to be invalid because the parties thereto contracted to keep the security good.

The record discloses a stipulated judgment for $223.40 in favor of defendant Lower Columbia Rating Bureau and against defendant Cox.

From that portion of the decree canceling the chattel mortgage above described, defendant Larsson appeals to this court.

A. C. Fulton, of Astoria (G. C. & A. C. Fulton, of Astoria, on the brief), for appellant.

Edward E. Gray, of Upland, Cal., for respondents.

BROWN, J. (after stating the facts as above).

As to the chattel mortgage herein involved, the trial court adjudged and decreed: "That that certain chattel mortgage in the complaint and in the answer and cross-complaint of the defendant John Larsson mentioned and described and by the defendant Larsson sought to be foreclosed in his cross-complaint, executed by the defendant Edward E. Cox, as mortgagor, to and in favor of defendant John Larsson, as mortgagee, and bearing date August 4, 1924 and, on that date, duly recorded at page 125, in Volume 10 Records of Chattel Mortgages, in the office of the county clerk of Clatsop County, Oregon, wherein and whereby the defendant Edward E. Cox duly mortgaged unto the defendant John Larsson all of his certain herd of milch cows on his dairy ranch, in said mortgage described as the farm of the defendant Cox, in Clatsop County, Oregon, comprising 40 head of milch cows, 10 head of young cattle and 2 horses then being on such farm, to secure the payment to defendant Larsson by defendant Cox of a promissory note of even date with such chattel mortgage, executed by defendant Edward E Cox, as Edward Cox, to and in favor of the defendant John Larsson in the sum of $2,058.00, bearing interest at the rate of six per cent. per annum from such date until paid, accordingly as described in the answer and cross-complaint of defendant Larsson, was executed and delivered for the consideration in said note expressed, and without intent to hinder, delay, or defraud any creditor of the defendant Cox, but that subsequent to the execution and delivery of the said promissory note and chattel mortgage, the mortgagor therein did dispose of a considerable portion of the milch cows covered by said chattel mortgage, and did substitute therefor certain other milch cattle, so that at the time of the commencement of this suit the cattle originally mortgaged were no longer included in the herd, nor in the possession of either the mortgagor or the mortgagee, and that at said time it was, and now is, impossible to identify and distinguish the cattle originally mortgaged from those animals thereafter substituted for cattle originally mortgaged and intermingled with those originally mortgaged."

The court found that the substitution was carried on by Cox pursuant to an oral agreement made between Larsson and himself at the time of the execution of the chattel mortgage or subsequent thereto, wherein and whereby it was understood and agreed between them that, whenever any milch cow or cows in the dairy herd should become substantially valueless for dairy purposes, then Cox, the mortgagor, should sell or otherwise dispose of such animals and purchase and substitute therefor in the dairy herd other milch cows, thereby maintaining the herd at the number contained therein at the time the mortgage was executed; that, by reason of the fact that the mortgagor, in compliance with the oral agreement above set out, sold or disposed of cows that had become useless for dairy purposes and purchased and substituted other dairy cattle in lieu thereof in order to maintain the herd at the original number and quality thereof, the chattel mortgage was rendered void "so far as the same applies to said dairy cattle," but that the invalidity of the mortgage did not extend to the two horses named therein for the reason that no substitution therefor was either authorized or made.

Larsson contends that any beneficial interest of Cox in the cattle cannot be reached by a creditor's suit, for the reason that the greater portion of the amount due the plaintiff from Cox was for services performed subsequent to the date of the mortgage. This is not the law. By reason of her judgment and the return of nulla bona, the plaintiff had a right to institute this suit for the purpose of reaching the property of the judgment debtor. See 15 C.J., § 62, "Creditors' Suits," where the editors say: "Any beneficial interest of a debtor in real or personal property which cannot be reached by regular process of law and is not expressly exempted by statute may be reached by a creditor's bill and subjected to the payment or satisfaction of the debt; and only such property may be so reached."

Furthermore it is well-established law in this jurisdiction that the filing of a creditor's bill and the service of process upon the defendant creates a lien in equity on the effects of the judgment debtor, and that the foundation for a creditor's bill is made when a judgment at law has been obtained, execution issued thereon, and such execution returned nulla bona. Miller v. Sherry, 2 Wall. 237, 17 L.Ed. 827. To the same effect, see Dawson v. Sims, 14 Or. 561, 13 P. 506; Leavengood v. McGee, 50 Or. 233, 91 P. 453; Ryckman v. Manerud, 68 Or. 350, 136 P. 826, Ann. Cas. 1915C, 522. We take the following from 8 R. C. L. § 38, "Creditors' Bills": "It is generally held that where no specific lien has been acquired upon the property before suit, the filing of a creditor's bil...